Pantera Capital Targets $100M For New ICO-Focused Hedge Fund

Jun 30 2017 | 12:04am ET

Digital currency investment specialist Pantera Capital is launching a new hedge fund that will focus on investing into the initial coin offerings (ICOs) of blockchain-based companies. 

The new fund, named Pantera ICO Fund LP, has already raised $35 million and is targeting an eventual $100 million in AUM. While small by hedge fund standards, the fund’s target is significant given the $600 million market for ICOs to date. The new fund joins Pantera’s Bitcoin Partners fund launched in 2014 in partnership with Fortress, Benchmark Capital and Ribbit Capital. 

The ICO fund is only available to U.S. institutions and investors, according to an article in CoinDesk, and will be managed by Pantera CEO Dan Morehead and Augur co-founder Joey Krug.

A mix of bitcoin/blockchain technology and crowdfunding, ICOs are quickly become the capital formation mechanism of choice for start-ups working on open-source blockchain-related projects, as the digital tokens issued in the offerings power the underlying protocols and smooth operation of the blockchains being developed. Indeed, a project named Bancor, backed by VC investor and longtime bitcoin supporter, Tim Draper raised around $150 million in an ICO by utilizing the ether currency native to the ethereum blockchain. 

The market risks becoming a bubble, however, as speculators crowd into high-risk ICOs with little understanding about how private blockchains work or what particular market solution they solve. It is also safe to assume regulators such as the SEC will be heavily scrutinizing ICOs at some point, as they are generally considered to be outside the scope of what current securities law defines as a security – not a situation the SEC is likely to ignore when millions of dollars are being raised by startups with little transparency or oversight. 

Pantera Capital was founded in 2003 by Morehead, formerly chief financial officer and head of macro trading at hedge fund Tiger Management. The firm initially focused on macro strategies until shifting to digital currency opportunities in 2013.

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